Vimal Gandhi, President -
(1.) ON account of difference between the learned Accountant Member and learned Judicial Member of Jaipur Bench, the following reference has been made to me for disposal in accordance with law:
REFERENCE UNDER Section 255(4) OF THE T.T. ACT, 1961
As there is a difference of opinion between the Members in the present appeal, the same is required to be resolved by one or more Members of the Tribunal as may be nominated by the Hon'ble President, Income-tax Appellate Tribunal in terms of Section 255(4) of the Act and also there is a difference in questions amongst the Members. The questions are separately given hereunder:
Question per Shri B.R. Jain, AM
1. Whether on the facts and circumstances the view of the Ld. Accountant Member that no disallowance could be made or that the view of the ld. Judicial Member to uphold disallowance of Rs. 25,000/- is correct and justified.
(2.) Whether under the facts, findings and on the basis of material, the ld. Commissioner of Income-tax (Appeals) was justified in holding that the addition of Rs. 12,800/- is not on account of catering but on account of low withdrawals and whether the decision that no addition on this account could have been made is a correct and justified view.
Question per Shri Dinesh K. Agarwal, JM
1. Whether on the facts and in the circumstances of the case and keeping in view the assessee's reply dated 28.12.92 and also the failure on the part of the assessee to bifurcate the expenses relatable to the country liquor account and IMFL account, the Judicial Member was justified in sustaining the disallowance of Rs. 25,000/- as fair and reasonable as against Rs. 60,000/- sustained by the authorities below ?
2. Whether on the facts and circumstances of the case and keeping in view the conterminous power of the ld. Commissioner of Income-tax (Appeals) who held that "the addition is not on account of catering but on account of low withdrawals for household expenses" and also in the absence of any specific ground of the assessee, the Judicial Member was justified in rejecting ground No. 2 of the assessee ?
1. We direct the registry to place the matter before the Hon'ble ITAT.
2. The facts of the case briefly stated are that assessee filed return declaring income of Rs. 1,32,180/-. He carried on business of Country Liquor, IMFL and Beer. The books of accounts are stated to be audited. The AO was of the view that income on sale of Country liquor has been correctly worked out by applying provisions of Section 44AC of the Income-tax Act. He further found that assessee had shown trading loss of Rs. 10,86,204/- in IMFL and Beer account. The AO asked the assessee to explain above loss which the assessee explained. His explanation has been accepted in para 1 page 2 of the assessment order.
The AO further found that a combined Profit & Loss account for Country liquor, IMFL and Beer has been maintained. He wanted separate and bifurcated expenses against sale of IMFL as well as sale of Beer. He was of the view that on bifurcation of account, expenses claimed at Rs. 2,91,110/- were excessive. This should be restricted to Rs. 92,379/-. He accordingly disallowed and added back Rs. 1,98.731/- out of expenses claimed by the assessee.
(3.) THE other addition of Rs. 12,800/- was made by the Assessing Officer with the following observations:
THE assessee has also income from Catering business. No books of accounts in respect of this business has been kept. THE income declared is only Rs. 7,200/-. This is less than what was declared in the earlier years. In A.Y. 90-91, income from this business was estimated at Rs. 16,000/-. I also find that the assessee has not made any withdrawals for household expenses. THE available funds for household expenses were pension of Rs. 7,164/- and catering income of Rs. 7,200/- totallings to Rs. 14,364/-. This is grossly inadequate, having regard to the status of the assessee. Keeping in view of the past history of the case and looking to the status of the assessee, 1 estimate the income from catering business at Rs. 20,000/- thereby making an addition of Rs. 12,800/- in this account. This addition will be taken care of the low withdrawals for household expenses, hence no separate addition is called for.
4.1. In order to resolve the controversy between the parties, it is necessary to note here with reference to quoted portion from the assessment order that addition of Rs. 12,800/- is sustained by the Assessing Officer on the following two counts:
(1) By estimating income of catering business at Rs. 20,000/- against Rs. 7,200/- shown.
(2) On consideration and by holding that household expenses totaling Rs. 14,364/- are grossly inadequate, keeping in view past history of the case and looking to the status of the assessee. " This addition (Rs. 12,800/-) will also take care of low withdrawals for household expenses, hence no separate addition is called for ", AO further added.
In other words, set off of addition of Rs. 12,800/- was allowed to cover low household expenses. Telescoping of the additions were allowed instead of making double addition. In the light of what is discussed above, it is difficult to contend with reference to AO's order that no addition for low household expenses was made. It is equally wrong to contend that : Assessing Officer did not make addition for catering business. At the cost of repeating, it has to be said that addition of Rs. 12,800/- was to cover catering business as well as low household withdrawals. I may further add that the course adopted by the Assessing Officer was perfectly legal. He was [justified in not making two separate additions and in allowing set off of addition made on one ground to cover the other ground.;